Effective Legal Resolutions, Done Efficiently

The pros and cons of a dual agency

On Behalf of | Nov 6, 2023 | Real Estate Law

In most real estate transactions in California, and especially in those transactions involving residential realty, the buyer and seller are normally represented by separate agents, with each agent owing a full and independent fiduciary duty to his principal. In some cases, however, the agents manage to persuade their principals to use the same agents. This arrangement is known as a “dual agency.”

One brokerage agency representing both parties

Several states have adopted legislation making dual agencies illegal, but California has not passed such laws. Instead, California realtors are required to inform their clients about the dual relationship and to make proper disclosure of their dual capacity. In some cases, the same brokerage agency will represent both parties, even though separate agents may be assigned to the buyer and to the seller. The agency in such cases must identify itself to both parties as a dual agent.

Defining an agent’s fiduciary duty

California courts have developed a detailed description of a real estate agent’s fiduciary duty. According to a recent court decision, a real estate agent’s fiduciary duty to a client requires “the highest good faith and undivided service and loyalty.” A dual agent may have difficulty living up to this standard if due care is not given to disclosing the dual relationship at the outset.

Both buyer and seller should be provided with the Disclosure Regarding Real Estate Agency Relationships (C.A.R. Form AD.) This form puts both the buyer and seller on notice of the dual agency. Distributing this form in the early stages of a transaction significantly lowers the risk that the individual acting as a dual agent will be subject to litigation if the transaction does not close.

Some experienced realtors feel that dual agency enhances the chances that the property will sell for higher price and that the parties will save money because they will only pay a single commission. Whether these beliefs are true, all parties to a dual agency transaction must remember that the informed consent of both parties must be obtained before the dual agency gets under way.